Author Topic: Managing a futureish Inheritance with minimal headaches and maximum Musachity  (Read 576 times)

Spaarwalvis

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I don't know if this is an "investment" or a "tax" topic, so feel free to move it around if I done goofed up.


OUR SITUATION:
My wife and I--38 and 37, 4 kids from age 9 on down--are moderately Mustachian, headed to RE from my generic UMC job (combined with my wife downshifting her small business) *on our own saved money* in our early 40s.
Our own Stache is held in my 401k (stock and bond index funds), Vanguard Roth IRAs for each of us (some stock index funds, some REITs), and an unprotected Vanguard account (just int'l stock index funds for now).  I rebalance a couple times a year across all the accounts to hit our allocations of domestic stock, VTIAX (int'l stock), VGSLX (REITs) and bonds.  Between my wife and me, I'm the financial mind.


THE INHERITANCE:
My Jewish-Amish great-grandfather, let's call him Benny, was a stone cold badass (who could star in a very entertaining MMM FI profile in his own right) and the only one in our family who's ever made serious coin.  My mom inherited a decent chunk from him, which she and my dad have expanded through . . . okay (by Boglehead standards, still better than most people) investment decisions and piling on some more savings of their own.  As far as I know, they never spent a dime from that inheritance until they retired, at which point they tapped some dividends for a couple of nice vacations.  I grew up thinking "Benny's money"--no one ever called it our money--added up to high six figures or so, which, when my parents died many decades hence, would be taxed hard by the feds (inheritance tax was still 38% in the lowest bracket then, and cut in at $600k or something) plus the State of Oregon, then split down the middle with my brother--in other words, a real windfall someday, but small/distant enough that I would still have to sweat for scholarships, get a good job right out of the gate, save early and often, yadda yadda.  It turns out that this was a ruse to spur us to success and achievement in life, and Benny's money [appreciated and supplemented] is really more in the multiple million dollar range.

Basically, I'm wondering how, tactically and strategically, I'm going to manage this fortune that will drop on us in a decade or three, preferably with minimal headaches.

And actually, it's already started dropping:  during the past several years, my parents have aperiodically gifted, within the gift limits, securities that I would probably not buy myself (actively managed mutual funds, appreciated stock for companies like General Mills).  They're either spending down, though I believe they're well under the federal estate tax limit, or just cheerfully tossing off money.  In terms of scale, I expect this will add up to more like a modest college fund for each grandkid than a fatty trust fund.  They seem to be gifting equal amounts to my four kids and my brother's two, so 2/3 of these pre-death gifts are going toward my side of the family.  These are UTMA transfers, and I'm the custodian on my kids' accounts, held at the same paper-and-pencil brokerage that Benny started doing business with in 1948, let's call them Schlomo's.  The guy I deal with for those accounts is the grandson of Benny's long-deceased broker.  My brother and his wife, who are not by my family's standards terribly interested in matters financial, have some money of their own parked with Schlomo III, but I'm more of a Vanguard/index fund DIYer.
Now mom and dad are now starting to gift to us adults as well, and I have to figure out what to do next.  I haven't co-mingled the gifts with our Stache, and I don't believe I want to.  Maybe I can keep it at Schlomo's, or in a separate Vanguard account.


MY WISHES:
My parents haven't spent Benny's money, and I don't want to either.  I'm 100% certain that when we FIRE, I want to do it on the back of our savings only, and not as a kept man; my wife is 95% on this point, but we're talking about it.  Moreover, I'm a man of Mustachian tastes, and I truly don't have plans to spend that kind of extra income.  I also don't want our kids to grow up spoiled or without the drive to grab life by the balls.  I'm slightly interested in passing Benny's money straight down to their kids, only allowing my or the next generation to tap it in case of emergency.  But I'm also wary of dictating too to our descendants from beyond the grave in too much detail.

Goals:
1)  Protect Benny's money from lawsuits,
2)  Protect from spendthrift/gambler kids or their spouses, within reasonable limits (certain other relatives got the same size pot as my mom and basically blew it through bad investments, including gold, derivatives they didn't understand and recording studio time for a band that did NOT make it big)
3)  Do some good with some of the money, though more like the interest than the principal.  Lots more thinking yet to do in this area.  I'm vaguely considering a donor-advised fund, but I don't know much about those.


So, THE QUESTIONS I believe I'm facing, in order of urgency:

1.  What should I do with the current gifts destined for us?
2.  What should I do with the kids' UTMA funds?  Possibly just leave them where they are, though the investments don't reflect my Bogleheady ideas.
3.  What groundwork should I lay for the overall brick when it lands?

The UTMA money has a sort of time horizon:  our kids' early adulthood, 10-18 years from now.  There is no time horizon for the rest of the money, since I don't intend to use it.  Strategically, how should I invest the longer-horizon pieces of Benny's money?  Same allocations/index funds I'm using with our own savings?  That would imply a *lot* of transaction churn and realizing capital gains.  I feel like I should have more ideas about investing with a permanent horizon endowment-style, but David Swensen hasn't fared as well lately as he did out of the gate.

Not knowing much about trusts, I suppose I'll have to at least look into all that.  I'm not privy to the full details, but Benny set up slow moving trusts when he died that kept his grandkids from having full control over their inheritances until their early thirties.  His second wife (not my great-grandmother, who died years before he did) and kids got (I think?) smaller bequests that they could touch right away.
I'm somewhat intrigued by what the Action Econ guy says about  parents/grandparents basically gifting to kids during their lifetimes and turning a modest nest egg over to them in early adulthood.  However, it seems that my parents are going to end up funding something similar, so we might not get in on that.


seattlecyclone

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My parents haven't spent Benny's money, and I don't want to either.  I'm 100% certain that when we FIRE, I want to do it on the back of our savings only, and not as a kept man; my wife is 95% on this point, but we're talking about it.  Moreover, I'm a man of Mustachian tastes, and I truly don't have plans to spend that kind of extra income.  I also don't want our kids to grow up spoiled or without the drive to grab life by the balls.  I'm slightly interested in passing Benny's money straight down to their kids, only allowing my or the next generation to tap it in case of emergency.  But I'm also wary of dictating too to our descendants from beyond the grave in too much detail.

I feel much the same way, and am in a similar situation. We FIREd in 2019, my wife and I with two young children. I expect to receive inheritances eventually (likely 10-30 years off) that would significantly increase our net worth; probably not double it, but maybe not that far off either. Most of it would be from my in-laws, but my parents are in a pretty solid financial position in their own right.

I understand your desire to FIRE "on the back of your savings only." I'll also posit that the existence of Benny's money in your parents' hands growing up gave them some measure of financial security that translated into certain privileges that you enjoyed during your childhood, the monetary value of which is difficult to quantify and disentangle from your existing stash. If you accept the premise that you're at least a little bit richer today because your parents had Benny's money, would it really be that different to accept some of it directly and use that to leave the workforce a little bit earlier? Given that you're within about five years of FIRE already and you don't expect to receive the bulk of the money until after that, maybe sequestering the gifts you do receive in the near future is more trouble than it's worth? Totally up to you though.

And actually, it's already started dropping:  during the past several years, my parents have aperiodically gifted, within the gift limits, securities that I would probably not buy myself (actively managed mutual funds, appreciated stock for companies like General Mills).

You might tactfully suggest to your parents that gifting less-appreciated securities would be more tax-efficient, as anything remaining when they die will receive a step up in basis to then-current value. Give away the duds while you're living. The winners will get a free increase in post-tax value when you die.

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3)  Do some good with some of the money, though more like the interest than the principal.  Lots more thinking yet to do in this area.  I'm vaguely considering a donor-advised fund, but I don't know much about those.

We have a relatively small donor-advised fund. It was a nice way to get rid of appreciated stock and take a tax deduction while we were working, without paying capital gains tax. That set up a fund that we can distribute money to charity for some time. We've been giving a few hundred here and there whenever we see a worthy cause, and it's pretty cool to have that ability.

I'm reminded of a cool idea that I think I saw from someone else on this forum. They had an ancestor that set up a trust fund where most of the money was to go to charity, but the living descendants needed to decide where to send it. The trust provided money for the family to get together at a cabin or something once a year. The official purpose of the trip is to decide where to send that year's charitable contributions, but the side benefit is helping to maintain connections across a growing family that might otherwise be lost. Seemed like a pretty neat idea to me! I might try to set up something similar when the time comes.

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So, THE QUESTIONS I believe I'm facing, in order of urgency:

1.  What should I do with the current gifts destined for us?

Whatever you like. That's the whole point of a gift. If you want to set it aside to form the basis for some intergenerational wealth in the memory of Benny and your parents, that's fine. If you want to count it toward your FIRE stash and get a quicker start on whatever you'd rather be doing than your current job, I give you permission to do that as well.

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2.  What should I do with the kids' UTMA funds?  Possibly just leave them where they are, though the investments don't reflect my Bogleheady ideas.

Look into how much capital gains income your kids can realize without owing any federal income tax. Use this space each year to sell some of the investments you don't like, harvest the gains, and reinvest in things that better suit your philosophy.

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3.  What groundwork should I lay for the overall brick when it lands?

This partly depends on how the money is held. If any of it is in an IRA it will need to be distributed within ten years. If it's all taxable the basis will reset so you'll be free to put it in index funds to your heart's content without owing any significant tax on the transfer. At that point it's up to you. If you want to live off the dividends, you can do that. If you want to put it in a donor advised fund for charitable purposes, you could do that. If you want to start some sort of UBI fund for your descendants, go nuts.

secondcor521

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Posting to follow.

I second pretty much everything @seattlecyclone said above.

I personally am monitoring (translation:  "worried about") the estate tax basic exclusion amount dropping from ~$11.5M per person to either $5M (+inflation, so probably ~$7M) per person in 2026 or $3.5M per person sooner.  The $3.5M number may come with an increase in the rate from 40% to 45% as well.

If your parents are having a hard time giving it away, some options that appear good to me are:

1.  Annual gifting of $15K per person.  So your Mom can give you $15K per year, your Dad can give you $15K per year, your Mom can give your spouse $15K per year, and your Dad can give your spouse $15K per year.  They can repeat that with your brother and his spouse, for a total of $240K per year.  If they need more, they can gift to the grandkids as well.

2.  Pay for the kids' college.  This is in addition to the above.  They have to pay the school directly for this to work.  This, in effect, is a wealth transfer to you because you'll presumably have college savings that you then won't have to tap.

3.  There is a similar thing to #2 for medical expenses paid directly to the provider.

All of the above escape gift and estate taxes if done properly.

I agree with the suggestion to give you investment duds that you can sell and reallocate as you wish without tax impact.  Investment asset transfers during life mean you get their basis and holding period.  At death, you get a step-up in basis and automatic long-term holding period.

Trusts really don't do much for tax savings - go take a look at the brackets in Schedule G in the Form 1041 instructions.  They can help for spendthrift and asset protection purposes.  Often, inheritances if kept completely and permanently separate are safe from divorce.

Beware the kiddie tax.  Kids unearned income above $2,200 is taxed at the parents' rate.
 https://www.investopedia.com/terms/k/kiddietax.asp is a decent readable summary.

You'll want to familiarize yourself with the term and concept of DSUEA.

Finally, you might look into disclaimers.  Disclaiming is basically saying "No thanks" to an inheritance.  Federal law allows both partial and complete disclaimers.  State law varies, but my state allows both as well.  If things are set up properly, then you can disclaim some of your inheritance from your parents and pass it directly to your kids.  Estate tax and generation skipping tax may apply; even so, this gets a runaway freight train of Benny money onto the kids' track sooner at a smaller valuation and may save *you* and your generation's level some estate planning headaches.

In addition to helping with the estate tax issue at your generation level, I think it might be good to drop a chunk of money into the kids' hands when they're young and you're still alive.  That way they can come to you for advice, or they can screw it up somewhat and learn a lesson or two before their big brick drops.  Of course it can depend on the kids and the context; if they're going to buy then wreck a supercar or snort it all away then that's probably not a good plan.

bwall

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I don't know if this is an "investment" or a "tax" topic, so feel free to move it around if I done goofed up.


OUR SITUATION:
My wife and I--38 and 37, 4 kids from age 9 on down--are moderately Mustachian, headed to RE from my generic UMC job (combined with my wife downshifting her small business) *on our own saved money* in our early 40s.
Our own Stache is held in my 401k (stock and bond index funds), Vanguard Roth IRAs for each of us (some stock index funds, some REITs), and an unprotected Vanguard account (just int'l stock index funds for now).  I rebalance a couple times a year across all the accounts to hit our allocations of domestic stock, VTIAX (int'l stock), VGSLX (REITs) and bonds.  Between my wife and me, I'm the financial mind.


THE INHERITANCE:
My Jewish-Amish great-grandfather, let's call him Benny, was a stone cold badass (who could star in a very entertaining MMM FI profile in his own right) and the only one in our family who's ever made serious coin.  My mom inherited a decent chunk from him, which she and my dad have expanded through . . . okay (by Boglehead standards, still better than most people) investment decisions and piling on some more savings of their own.  As far as I know, they never spent a dime from that inheritance until they retired, at which point they tapped some dividends for a couple of nice vacations.  I grew up thinking "Benny's money"--no one ever called it our money--added up to high six figures or so, which, when my parents died many decades hence, would be taxed hard by the feds (inheritance tax was still 38% in the lowest bracket then, and cut in at $600k or something) plus the State of Oregon, then split down the middle with my brother--in other words, a real windfall someday, but small/distant enough that I would still have to sweat for scholarships, get a good job right out of the gate, save early and often, yadda yadda.  It turns out that this was a ruse to spur us to success and achievement in life, and Benny's money [appreciated and supplemented] is really more in the multiple million dollar range.

Basically, I'm wondering how, tactically and strategically, I'm going to manage this fortune that will drop on us in a decade or three, preferably with minimal headaches.

And actually, it's already started dropping:  during the past several years, my parents have aperiodically gifted, within the gift limits, securities that I would probably not buy myself (actively managed mutual funds, appreciated stock for companies like General Mills).  They're either spending down, though I believe they're well under the federal estate tax limit, or just cheerfully tossing off money.  In terms of scale, I expect this will add up to more like a modest college fund for each grandkid than a fatty trust fund.  They seem to be gifting equal amounts to my four kids and my brother's two, so 2/3 of these pre-death gifts are going toward my side of the family.  These are UTMA transfers, and I'm the custodian on my kids' accounts, held at the same paper-and-pencil brokerage that Benny started doing business with in 1948, let's call them Schlomo's.  The guy I deal with for those accounts is the grandson of Benny's long-deceased broker.  My brother and his wife, who are not by my family's standards terribly interested in matters financial, have some money of their own parked with Schlomo III, but I'm more of a Vanguard/index fund DIYer.
Now mom and dad are now starting to gift to us adults as well, and I have to figure out what to do next.  I haven't co-mingled the gifts with our Stache, and I don't believe I want to.  Maybe I can keep it at Schlomo's, or in a separate Vanguard account.


MY WISHES:
My parents haven't spent Benny's money, and I don't want to either.  I'm 100% certain that when we FIRE, I want to do it on the back of our savings only, and not as a kept man; my wife is 95% on this point, but we're talking about it.  Moreover, I'm a man of Mustachian tastes, and I truly don't have plans to spend that kind of extra income.  I also don't want our kids to grow up spoiled or without the drive to grab life by the balls.  I'm slightly interested in passing Benny's money straight down to their kids, only allowing my or the next generation to tap it in case of emergency.  But I'm also wary of dictating too to our descendants from beyond the grave in too much detail.

Goals:
1)  Protect Benny's money from lawsuits,
2)  Protect from spendthrift/gambler kids or their spouses, within reasonable limits (certain other relatives got the same size pot as my mom and basically blew it through bad investments, including gold, derivatives they didn't understand and recording studio time for a band that did NOT make it big)
3)  Do some good with some of the money, though more like the interest than the principal.  Lots more thinking yet to do in this area.  I'm vaguely considering a donor-advised fund, but I don't know much about those.


So, THE QUESTIONS I believe I'm facing, in order of urgency:

1.  What should I do with the current gifts destined for us?
2.  What should I do with the kids' UTMA funds?  Possibly just leave them where they are, though the investments don't reflect my Bogleheady ideas.
3.  What groundwork should I lay for the overall brick when it lands?

The UTMA money has a sort of time horizon:  our kids' early adulthood, 10-18 years from now.  There is no time horizon for the rest of the money, since I don't intend to use it.  Strategically, how should I invest the longer-horizon pieces of Benny's money?  Same allocations/index funds I'm using with our own savings?  That would imply a *lot* of transaction churn and realizing capital gains.  I feel like I should have more ideas about investing with a permanent horizon endowment-style, but David Swensen hasn't fared as well lately as he did out of the gate.

Not knowing much about trusts, I suppose I'll have to at least look into all that.  I'm not privy to the full details, but Benny set up slow moving trusts when he died that kept his grandkids from having full control over their inheritances until their early thirties.  His second wife (not my great-grandmother, who died years before he did) and kids got (I think?) smaller bequests that they could touch right away.
I'm somewhat intrigued by what the Action Econ guy says about  parents/grandparents basically gifting to kids during their lifetimes and turning a modest nest egg over to them in early adulthood.  However, it seems that my parents are going to end up funding something similar, so we might not get in on that.

Wow! What an awesome, high-quality problem to have! However, I do appreciate the conundrum.

I would strongly urge you to read the book "Family Wealth--Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations".
Link:
https://www.amazon.com/Family-Wealth-Keeping-Intellectual-Financial-Generations/dp/157660151X/ref=sr_1_8?Adv-Srch-Books-Submit.x=0&Adv-Srch-Books-Submit.y=0&dchild=1&keywords=family+office&qid=1613398416&s=books&sr=1-8&unfiltered=1

This book was written by a retired estate planning attorney and it's (IMO) the culmination of his life's work. Tens of thousands of dollars of billable hours are available to you for, well, almost nothing by comparison. ALL the questions you pose above are directly addressed in this book.

As I see it, the biggest risk to Benny's fortune isn't the taxman, it's your kids' attitude toward work and money. (To wit, how have your parents' siblings managed their portion of Benny's money?)  Learn how to steer against that in this book.

Best of luck and keep us updated!


waltworks

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I'm in a similar situation (though personally FI without any inheritance) and my wife and I have discussed doing something like a family UBI for kids and grandkids. Not a lot of money, but enough to pay for food/shelter and pursue interesting dreams/goals that are financially risky (ie, try being a musician/artist, starting a longshot business, etc) with a safety net in place.

There is of course the possibility that we produce some kid that is so lazy that living on rice and beans in an efficiency apartment and doing nothing at all is a fine life and we've dis-incentivized work. Honestly if the kid is that lazy, though, the die is pretty much already cast. Likewise if someone becomes an addict or something - at least that money can help them stay off the streets/live a safer and healthier life. I tend to doubt anyone is going to run out and start doing drugs because they get $1000 a month and a place to live from the family trust.

At some point, though, if you're really talking about a lot of money, you have the problem that it's going to actually accumulate/grow over the years unless you give significant amounts away either to family or charity. I'd feel weird about the family permanently/for generations having an untouchable giant pile of money. What would be the point?

I don't think there's an easy answer if there's a lot of money involved but when I think back to my childhood/young adulthood, I always knew that if things *really* went south my parents would bail me out. It didn't stop me from working hard/being successful, and it certainly let me try some stuff (my current business that made me FI) that I might not have otherwise. So in a way I'm just imitating what my parents gave me when I was starting out, but more formally.

-W

bwall

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I'd feel weird about the family permanently/for generations having an untouchable giant pile of money. What would be the point?
-W

The old adage 'shirtsleeves to shirtsleeves in three generations' tells us that the above scenario is extremely unlikely.

The most likely outcome is that the grandchildren of the Fortune Amasser will most likely blow everything and leave nothing for their children. Nothing.


seattlecyclone

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I'd feel weird about the family permanently/for generations having an untouchable giant pile of money. What would be the point?
-W

The old adage 'shirtsleeves to shirtsleeves in three generations' tells us that the above scenario is extremely unlikely.

The most likely outcome is that the grandchildren of the Fortune Amasser will most likely blow everything and leave nothing for their children. Nothing.



The OP's family has already beaten the odds in that regard. Keeping up financial education and ethic of stewardship with the next generation will be a perpetual challenge.

Spaarwalvis

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I'll also posit that the existence of Benny's money in your parents' hands growing up gave them some measure of financial security that translated into certain privileges that you enjoyed during your childhood, the monetary value of which is difficult to quantify and disentangle from your existing stash.

To a certain extent, yes - but only somewhat since they didn't touch the money until recently.  I think the mere existence of the cushion let my mom go back to school at one point, rather than taking whatever job she could get.  Also might have allowed them to move a couple states over just before I was born so my dad could take a risk shifting careers when he already had an okay job.


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I'm reminded of a cool idea that I think I saw from someone else on this forum. They had an ancestor that set up a trust fund where most of the money was to go to charity, but the living descendants needed to decide where to send it. The trust provided money for the family to get together at a cabin or something once a year. The official purpose of the trip is to decide where to send that year's charitable contributions, but the side benefit is helping to maintain connections across a growing family that might otherwise be lost. Seemed like a pretty neat idea to me! I might try to set up something similar when the time comes.

That is really neat!  Using Benny's money to compel family reunions (which I hope he wouldn't mind) gave my wife a chuckle.  We'll def consider something like that.  I wonder if I could talk my brother into throwing in some of his share too.


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Beware the kiddie tax.  Kids unearned income above $2,200 is taxed at the parents' rate.

Oh, I'm aware of the kiddie tax.  :-)  I found out one particularly fat year (2018?) when interest and dividends alone triggered kiddie tax on two of our kids' UMTA accounts.  But the overall point is good - we'll have to tread carefully with taxes on those gifted assets.


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I would strongly urge you to read the book "Family Wealth--Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations".

Doesn't seem bad.  Thanks for the tip.


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There is of course the possibility that we produce some kid that is so lazy that living on rice and beans in an efficiency apartment and doing nothing at all is a fine life and we've dis-incentivized work. Honestly if the kid is that lazy, though, the die is pretty much already cast . . . .  I'd feel weird about the family permanently/for generations having an untouchable giant pile of money. What would be the point?

If I'd gotten my slice of Benny's money at age 19, that just might have been me.  I got way less "lazy stoic" (less depressed?) when I met my wife a few years later.  I supposed that goes to show how much care to take in turning big money (as opposed to college room and board money) over to 19 year olds.


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The most likely outcome is that the grandchildren of the Fortune Amasser will most likely blow everything and leave nothing for their children. Nothing.

Maybe.  One the one hand, we're far from broke, and I'm going to be able to FIRE on non-Benny earned income.  On the other hand, as my parents have pointed out many times, 3 generations since Benny have not yielded another Benny.  :-#



waltworks

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I'd feel weird about the family permanently/for generations having an untouchable giant pile of money. What would be the point?
-W

The old adage 'shirtsleeves to shirtsleeves in three generations' tells us that the above scenario is extremely unlikely.

The most likely outcome is that the grandchildren of the Fortune Amasser will most likely blow everything and leave nothing for their children. Nothing.

That wasn't my point. You could set up a trust to never allow anyone to spend the money, forever. You would hence have descendants with incredible wealth, but stay "shirtsleeves"... forever.

At at some point, money should be used to improve someone's life, not just be hoarded. I have elderly multimillionaire neighbors who spend their time mowing their own lawn and sweeping leaves off their deck and such, all day, every weekend, all summer. Is it thrifty? Sure! Is it what would bring them the most enjoyment? I kinda doubt it. There are the retired janitors who die with a million bucks stuffed into their walls and such, too.

You don't want to get caught in the mental trap of caring about money for itself. Money is a tool. If you're so worried about your descendants somehow wasting it that you can't bring yourself to use it to make their lives better, that's unfortunate.

-W

PDXTabs

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I'd feel weird about the family permanently/for generations having an untouchable giant pile of money. What would be the point?
-W

The old adage 'shirtsleeves to shirtsleeves in three generations' tells us that the above scenario is extremely unlikely.

The most likely outcome is that the grandchildren of the Fortune Amasser will most likely blow everything and leave nothing for their children. Nothing.

That wasn't my point. You could set up a trust to never allow anyone to spend the money, forever. You would hence have descendants with incredible wealth, but stay "shirtsleeves"... forever.

Actually, you can't, at least not in any country that I'm aware of. In the USA the trust must be dissolved 21 years after the death of the last beneficiary that was alive when the trust was created, sort of for the reasons that you outlined. Money is for the living, life is for the living, you don't get to control people forever once you die.

BicycleB

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I'd feel weird about the family permanently/for generations having an untouchable giant pile of money. What would be the point?
-W

The old adage 'shirtsleeves to shirtsleeves in three generations' tells us that the above scenario is extremely unlikely.

The most likely outcome is that the grandchildren of the Fortune Amasser will most likely blow everything and leave nothing for their children. Nothing.

That wasn't my point. You could set up a trust to never allow anyone to spend the money, forever. You would hence have descendants with incredible wealth, but stay "shirtsleeves"... forever.

Actually, you can't, at least not in any country that I'm aware of. In the USA the trust must be dissolved 21 years after the death of the last beneficiary that was alive when the trust was created, sort of for the reasons that you outlined. Money is for the living, life is for the living, you don't get to control people forever once you die.

I've read that that used to be true, but that the good ol' USA brought innovation to field of trusts when South Dakota passed a statute enabling perpetual or dynasty trusts.

Basics:
https://www.swierlaw.com/library/south-dakota-dynasty-trusts-the-basics.cfm

Trust grantors can implement almost any rules or conditions:
https://www.mondaq.com/unitedstates/Finance-and-Banking/10682/Using-South-Dakota-Law-For-Perpetual-Trusts

***

@Spaarwalvis, I can relate to the worry about shirtsleeves, especially the part about what if too big an early gift would cause a "lazy thrifty" kid to loaf forever on rice and beans. That's more my "FI" lifestyle than I like to admit, and I would very likely have lapsed into it from age 22 or so if given the chance. Good luck with your planning.


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The most likely outcome is that the grandchildren of the Fortune Amasser will most likely blow everything and leave nothing for their children. Nothing.

Maybe.  One the one hand, we're far from broke, and I'm going to be able to FIRE on non-Benny earned income.  On the other hand, as my parents have pointed out many times, 3 generations since Benny have not yielded another Benny.  :-#

LOL!
« Last Edit: February 15, 2021, 03:43:01 PM by BicycleB »